How Would You Trade It if You Knew ...

[bakrob99 11]

this thread is the biggest heap of BS I've ever seen on any trading forum

 

I respect your right to your opinion - but I think you may be missing the point. The real answer I think that will come out is that even if you know with a certainty what the price will be in the future - to take advantage of that information still requires that you make a reasonable trading entry decision using normal techniques which will allow you to hold for more profit and build a position, increasing size as the position becomes more profitable.

 

The reason is simple: If you went all in at the first opportunity you might discover that you could not withstand a normal market pullback against your position. So, in order to "solve the riddle", you will have to start small and build as the position gains profitability but still trailing a stop to protect losing your profits. Any other way - and you would run the risk of ruin.

 

The lesson may be that to be a Supertrader and really make some money you need to start small and build positions.

 

If you don't agree - you could perhaps mention another method which I have overlooked.

[bobcollett 10]

I respect your right to your opinion - but I think you may be missing the point. The real answer I think that will come out is that even if you know with a certainty what the price will be in the future - to take advantage of that information still requires that you make a reasonable trading entry decision using normal techniques which will allow you to hold for more profit and build a position, increasing size as the position becomes more profitable.

 

The reason is simple: If you went all in at the first opportunity you might discover that you could not withstand a normal market pullback against your position. So, in order to "solve the riddle", you will have to start small and build as the position gains profitability but still trailing a stop to protect losing your profits. Any other way - and you would run the risk of ruin.

 

The lesson may be that to be a Supertrader and really make some money you need to start small and build positions.

 

If you don't agree - you could perhaps mention another method which I have overlooked.

 

Hi bankrobber,

Lets start small , 1 contract, and build a position, buy on pullbacks, whatever.

The market rallies on major news the very first day (Spain wins the lottery). You hold 1 contract.

The price goes way past the target and for the next 19 days sells off to the target.

And every time you buy a pullback you lose more.

So you end up with 1 contract and a small profit.

You can't start small:2c:

kind regards

bobc

 

PS Taylors Trading Technique will solve the problem, but I am not proficient enough to explain it.I will talk to WHY? and mitsubishi.

[SIUYA 11]

Sp even having knowledge in advance is not helpful. You would wait until it was very close to Sept 20 and what if on that date it opened at 1460? What would you do then?

 

I must be missing something....where did 1460 come into it?

I read it differently - I thought that you know two pieces of information about the future.....

"How would you trade it if you knew what the ES would be at September 25th 2012."

 

and "Let's say a recent time traveller accidentally left the business section from his newspaper dated Thursday September 20, 2012. There was no other references to the prior week's or days."

 

In other words today being August - you had two prices of info....hence you could either risk the load up - and getting margined out, and going broke in the meantime.....or do an option based on the close on those days (you actually get two bites at the cherry)

 

Even slowly increasing a small account to a larger one does not guarantee you will not get taken out (small chance of course).

eg; Sep 24 Black Monday - market is smashed - broker closes you out, and issues an order for you to pay any difference. you have no more money to open an accont else where, the market rallies back Sep 25th (this happened Oct 1997)

 

I like the idea of the thread as it involves scenarios, but even with the best money management, a long history of probable scenarios for the market moves, and fantastic risk management, nothing is guaranteed. You might have had the account with MFG of PFG or similar and they go broke on that day.....bye bye money even if you had won.

[bakrob99 11]

Hi bankrobber,

Lets start small , 1 contract, and build a position, buy on pullbacks, whatever.

The market rallies on major news the very first day (Spain wins the lottery). You hold 1 contract.

The price goes way past the target and for the next 19 days sells off to the target.

And every time you buy a pullback you lose more.

So you end up with 1 contract and a small profit.

You can't start small:2c:

kind regards

bobc

 

PS Taylors Trading Technique will solve the problem, but I am not proficient enough to explain it.I will talk to WHY? and mitsubishi.

 

You start at the open at 1411 with 1 contract. Price moves 5 pts in your favour. Add 1 contract. Trail stop to BE on 1st contract. Price moves 5 pts in your favour. Add 1 contract. Trail stop to +5 on first, BE on 2nd. Price moves 5 pts in your favour. Add 1 contract. Trails stop to +10 on 1st, +5 on 2nd, BE on 3rd.

 

According to your scenario - ( market rapidly moving in your favour) I think you'd do pretty. well.

[bakrob99 11]

I must be missing something....where did 1460 come into it?

I read it differently - I thought that you know two pieces of information about the future.....

"How would you trade it if you knew what the ES would be at September 25th 2012."

 

 

I like the idea of the thread as it involves scenarios, but even with the best money management, a long history of probable scenarios for the market moves, and fantastic risk management, nothing is guaranteed. You might have had the account with MFG of PFG or similar and they go broke on that day.....bye bye money even if you had won.

 

I am assuming the paper said it closed at 1460. It doesn't matter which price it is. If it said it closed at 1360 How would that help? You'd have to make the same but opposite decisions to take advantage of the short side.

 

In my mind- it's similar to the problem you face when a TRENDDAY comes along after days of consolidation. You "know" it's going to close higher - how to take advantage of that. The best way if to get on board small and start building an hold on. Start with a trailed stop loss which becomes a trailed profit exit.

 

As for your risk management - exactly right. Having perfect knowledge of price at the future date (with the exception of options strategies as was pointed out earlier could be designed to take advantage of this knowledge ) still poses risk management challenges.

[bakrob99 11]

I think this thread is interesting but would be more interesting if someone actually took the work to create a hypothetical or pick some previous dates to see how this would play out.

 

Be my guest. Throw another scenario at it.

[SIUYA 11]

Re the money management thats why a binary option - or as I tried to suggest a straight bet for where it closed is the best way - let someone else worry about the money management...

It would be interesting to see the odds given for such a thing v the options play and the margin required.....there is also the scalablity v the ability to pay (you for risk of broken legs) and the bookie if you are right.

 

Trying past scenarios would only work if you could try every past scenario, and then still you would only be able to say with a degree of certainty this is expected....much the same as any backtest.....

 

and hence your point - you can only play it how you see it and if your experience tells you that its a trend day (or the time traveller helps you out) you still need to play the game.....the rest is just a punt.

 

It would make for an interesting social experiment to able to leave a newspaper on a train with such a thing - you would need a large sample size and then how would you track it. You know some people would go all in, and some would get it right.......there is no accounting for luck!

[MightyMouse 12]

I really do not know what would be gained from back testing.

 

Price at time is known, the volatility beforehand is not know and that is the problem.

 

You could blow your whole account in futures between now and then trying to take advantage of the known fact that the market will be at 1460 ( I say 1455).

 

Suggesting that you wait for a pull back is silly since there may not be one and you can miss the whole move. No one said it can't ever go higher than 1460 in the interim either.

 

You can't add every time it moves against you since there is no cap to how low it can go before it reaches its final destination. We can then say about you that you were right, but you ran out of money.

 

It really seems like futures is the wrong way to do it.

 

Options or bust.

 

I am assuming that price history is not available in this magical newspaper.

[bakrob99 11]

I am assuming that price history is not available in this magical newspaper.

 

Sadly no.

 

So your point is that even having perfect knowledge in advance is not really a help in terms of making money from it in the futures market?

[SIUYA 11]

Sadly no.

 

So your point is that even having perfect knowledge in advance is not really a help in terms of making money from it in the futures market?

 

I think all you could say is that it is not a guarantee - but I for one would certainly think that being able to see into the future even if the information is limited would still be a help.Even if you adopted a strategy of....

Everytime there is a breakout away from the number you took profits quickly, everytime there is a break toward the number you let it ran. Take all profits using a really tight trail when an exisitng long is above the price level...v v for shorts.

A simple strategy like that might be enough to swing the difference......and all you are doing is taking profits quickly.

 

Again - leverage is key as gaps can occur....it all depends on your assessment of the probability doesn't it.....plus a healthy love of risk. If it came off you would say I should have been bigger, if it did not you say lucky i did not go all in.

[bakrob99 11]

I think all you could say is that it is not a guarantee - but I for one would certainly think that being able to see into the future even if the information is limited would still be a help.Even if you adopted a strategy of....

Everytime there is a breakout away from the number you took profits quickly, everytime there is a break toward the number you let it ran. Take all profits using a really tight trail when an exisitng long is above the price level...v v for shorts.

A simple strategy like that might be enough to swing the difference......and all you are doing is taking profits quickly...

 

So when the market is trending up like it has been for weeks, and the "known" 1420 or higher target is in mind, what prevents us from following exactly a strategy like that as if we had the future newspaper?

 

This is the point that I had in mind when I started the thread - that having a future target which can be based on many different technical or fundamental factors, and the DISCIPLINE to trade in its direction is the key to building profitable and sizable positions.

 

Ever since the 1320 low test and rally up almost 100 handles - trading intraday, on short timeframes, without overnight positions - it is hard to do as well as a position trader might have done had he entered long near the 1320 lows one month ago and held on to it. Possibly adding contracts as it closed highers.

 

Intraday - faced with narrow ranges and choppy price action - much tougher going since then with many more entry and exit decisions.

 

I posted in another forum about 3 or 4 weeks ago that I thought 1420 would be hit fairly shortly. And while we haven't gone that far - we've got quite close and there's still certainly time left in this most recent swing to hit 1420 and much much higher.

 

Reviewing my results since that post - I would have done much better to just enter and hold and add as it traded into profit.

 

This concept - but on a daily basis often plays out when you realize around 10-10:15 am that a trend day in underway and you out of a position with a small profit but missing the bigger move. The key is to get in - stay in - and add ... not scale out.

 

Many intraday traders lose on the trend days fading the move. This no longer happens to me. I welcome trend days and have strategies to play them which I have posted occasionally. But mostly I am exiting and re entering and in almost all cases - holding the original entry AFTER one has evidence that a trend day is in place - would produce more profits.

[SIUYA 11]

what you mean letting profits run and not interfering with them might work

One of the often quoted truths that people ignore.....

 

100% agree with you bakrob99 - plus I tend to think its an urban myth (prepare for flame) that holding things overnight is risky - when you consider the offsetting reward it is often not the case - whereas if you are overleveraged and are unable to accept that risk then its a different matter.

From a simple pov if every day you come in an put on the same trade, then unless the exit/ re entry are significantly better each time then you might have been better off letting it run.

Mostly this will depend on you - your history of picking levels, and the strategy you are applying (short term scalpers might not care about such levels - long term players might be more interested in buying more at your TP levels etc;)

 

I think a lot goes back to the feeling of either wanting control, or the feeling of being right.

That is - people would rather get the feeling of I get in and out and make money - than - I got in once and made more money but really had no control and did nothing after entering.

Its the decision process as you correctly state that gives the feeling of control - maybe why there is a focus on % profitable trades....makes you feel good, but may or may not make your account feel good.

so even if you had a newspaper revealing the future - most would still stuff it up by trying to prove themselves right.....best use an option that you cant touch after the initial entry.

 

(It is an impulsive habit I had (have sometimes ) that I am aware of - brokers love you for it)

[BlueHorseshoe 10]

It would make for an interesting social experiment to able to leave a newspaper on a train with such a thing - you would need a large sample size and then how would you track it. You know some people would go all in, and some would get it right.......there is no accounting for luck!

 

Couldn't we leave the newspaper in the lobby at Goldman Sachs? :rofl:

 

BlueHorseshoe

[bakrob99 11]

Couldn't we leave the newspaper in the lobby at Goldman Sachs? :rofl:

 

BlueHorseshoe

 

Why would you want to give it to them? Would you think they would help the market reach the target early? Or would they be fighting the move?

 

The more that people found out about it, what would the effect on price action be? Anything?

[BlueHorseshoe 10]

Why would you want to give it to them?

 

To see if anyone there was stupid enough to believe that they'd stumbled upon such a thing as an actual newpaper from the future . . .

 

BlueHorseshoe

[bakrob99 11]

To see if anyone there was stupid enough to believe that they'd stumbled upon such a thing as an actual newpaper from the future . . .

 

BlueHorseshoe

 

Maybe you should have one made up and try it.

[SIUYA 11]

Blue ---- Goggle the Russian pyramid scheme MMM - people will invest even when told its a fraud and a scam and are told as much right from the start.

I am sure you would find people who trade off a paper from the future!

 

Never underestimate the stupidity of even normally rational people especially when it comes to money and economics - behavioural finance too often shows that....and those little things we refer to as 'bubbles'.....

or even those newsletters that claim to provide you 'the secret that others dont want you to find out about' - I think I would prefer the newspaper from the future...

[MightyMouse 12]

Sadly no.

 

So your point is that even having perfect knowledge in advance is not really a help in terms of making money from it in the futures market?

 

Well, clearly I would want to take longs only for the next few weeks as long as it stayed below 1460. But, without using other derivatives, I do not see a smart way to take advantage of the foreknowledge using futures; at least, not without considering the unlikely.

[Patuca 13]

if paper said it closes at 1460 on said day then 20 seconds before the close I would short 2000 contracts if it is above the close and make my target profit 2 ticks above 1460. If it is trading below the 1460 when at 20 seconds before the close I would go long 2000 contracts with target profit 2 ticks below 1460. i would use no stop loss.

[bakrob99 11]

if paper said it closes at 1460 on said day then 20 seconds before the close I would short 2000 contracts if it is above the close and make my target profit 2 ticks above 1460. If it is trading below the 1460 when at 20 seconds before the close I would go long 2000 contracts with target profit 2 ticks below 1460. i would use no stop loss.

 

This implies that you have an account large enough to manage 2000 contracts. An account that size would typically be owned/managed by someone who was familiar with accepting risk and managing it in order to derive substantial profits. So I think there would have been opportunities to profit prior to 20 seconds before the close.

 

Having said that - your statement suggests that there is nothing to be gained trading futures with a known target unless that target is very close in terms of time and price.